The Retail Outlook? Cloudy with a Chance of Meatballs

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Stanford professor and author of the bestseller Mindset, Carol Dweck describes grading students as a young teacher. If a student was not progressing toward the expected learning outcome, rather than a failing grade, the mark given was a not yet. Holiday shopping is now underway, and 2021 fast approaches, are the signs for retail signaling recovery, or are they indicating not yet?

Divergent Outlooks

Green shoots have appeared. Goldman Sachs has raised its 2021 GDP forecast to 6.2 percent from 5.6 in anticipation of broad vaccine distribution by mid-2021. U.S. Census data reports that retail sales rose 1.9 percent between August and September, with an emphasis on clothing and car sales. Unemployment has been steadily dropping, and the September Consumer Confidence Survey indicates a 15.5 point increase over the August accounting. Some are predicting a swoosh-shaped recovery (a slow, rising, momentum-based move) and many others are anticipating a recession. As Robin Lewis said in the recent Holiday 2020 Robin Report podcast, “We are standing in front of either the gates of hell or the heavenly gates”.

[callout]NPR recently reported a staggering data point: Women are leaving the workforce at four times the rate as men. Just in September, 865,000 women over 20 dropped out of the American workforce.[/callout]

While the lagging indicators of economic activity and sentiment point up and to the right, the real-time signals are flashing yellow. Those signals, based on announced or anticipated job cuts (airlines, Disney, city and state employees), rising global and national infection rates, and the lack of an adequate federal response, are feeding a recessionary consumer mindset. If this mindset takes hold, it can affect nearly all segments of retail consumption.


I would label the current recovery configuration as K-shaped, my nutshell definition follows: some parts of the economy recover and grow, while others decline. I see clear points of bifurcation between the winners and the losers. In a macro sense, the winners are obvious, big tech, streaming services, essential businesses, and Wall Street. The losers include main street, travel, restaurants, entertainment venues-the list goes on. Supporting the macro-categories are people, and the consumer appetites of those people. The winner/loser split among this group breaks down further to employed vs. un, or soon-to-be unemployed, and upper vs. middle and lower-income.


Among the upper-income cohort, the political and cultural tensions, combined with school closures, and pandemic related lifestyle-friction, have resulted in subconscious anxiety. Despite that, the booming stock market and separation from the acute devastation of the pandemic (generally speaking), have allowed many consumer behaviors to resume. Sales of luxury cars and homes are reportedly rising. LVMH beat market expectations with a 12 percent jump in global sales during Q3 2020.

Coping Mechanisms

As the lockdowns moved the country indoors, the financially secure crowd began shopping for Instagram-worthy cocoon-apparel. Celebrity darling Entireworld sold through their entire inventory of colorful $176 cotton sweatsuits described to the NYTimes by owner/designer Scott Sternberg, (they)“sort of make you look like a cross between a Teletubbie, Ben Stiller in The Royal Tenenbaums, and a J.C. Penney ad from 1979.” Sales of Lululemon’s high-end comfort-ware were up despite store closures. The Canadian brand reported a year-over-year revenue growth rate of 2 percent in the quarter that ended August 2.

Lululemon spent some of those earnings on the prestige, at-home-connected fitness company MIRROR. The purchase was announced in late June as the luxury fitness category continued to explode. Also grabbing its share of this cohort ‘s spend is Peloton. Despite a recent pedal recall, the fitness lifestyle brand announced revenue growth of 66 percent in Q3. Peloton’s stock price has increased approximately7x since hitting a low of around $19 in March.

Reuters dug further into September’s robust sales statistics and the extensiveness of discretionary purchases. Online retail sales rose by 0.5 percent overall. Furniture was also up by 0.5 percent. “Sporting goods, hobby, musical instrument, and book stores rebounded 5.7 percent. These categories notched big year-on-year increases in September, which economists said showed the uneven impact of the recession.” Chris Low, chief economist at FHN Financial in New York was interviewed, “It’s further evidence of how many top earners have managed to dodge the pandemic by working from home, while most lower-paid workers have been forced to choose between jobs putting them at risk, when they can find them, and unemployment.”

In a September Deloitte retail forecast, Daniel Bauman, Deloitte’s U.S. economic forecaster explained this discretionary splurge crediting “reduced spending on pandemic-sensitive services such as restaurants and travel.” For the consumers on the downside of the K-shaped recovery, an $1895 stationary bike just won’t fit in this year’s holiday stocking.


A recent Bloomberg Business Week article describes the cautious mood of a less secure consumer, “Most years, Cassandra Davis wakes up at the crack of dawn on Black Friday armed with a battle plan formed with circled newspaper ads and some online research. She warms up her car in the Minneapolis winter for half an hour before driving to Target, Walmart, or J.C. Penney to cash in on the deals they’re offering… In 2020 she’s not sure her tradition will survive. ‘I have to think about all of the what-ifs,’50-year-old Davis says. ‘I’m really just watching the dollar even if things are inexpensive. We still have to be careful, because we don’t know what happens day to day with this pandemic.’”

“How Am I? You Know”

A recent Marketplace/Edison Research poll lays-out a data set detailing factors influencing consumer sentiment among groups on shakier ground.

  • In the past six months, 18 percent of renters have missed a payment on their rent, while 64 percent of Americans are at least “a little” fearful of being unable to pay their rent.
  • In the past six months, 14 percent of mortgage holders have missed a payment on their mortgage, and 48 percent are at least “a little fearful that they will miss their mortgage payment.
  • More than half of all Americans are fearful of losing their jobs, and just one-third are very confident they would find a new job should they lose their current job.
  • 61 percent of Americans say they are at least “a little” fearful of facing an unexpected medical bill.
  • 72 percent of Americans who have student loans say they are at least “a little” fearful about being unable to make student loan payments.

Troubling Trends

NPR recently reported a staggering data point. “Women are leaving the workforce at four times the rate as men. Just in September, 865,000 women over 20 dropped out of the American workforce.” The Marketplace/Edison Research poll explains why:

  • 19 percent of parents say they’ve quit their jobs or taken a leave of absence to help their children with school.
  • 27 percent of parents say their child is currently learning completely in-person, 49 percent say they’re learning completely online remote, while 24 percent say it’s a mix of in-person and online remote learning.
  • 13 percent of parents say they’re paying for additional help with childcare or tutoring.

Household duties and childcare have traditionally fallen more heavily on women, now we are adding distance learning to parental chores and many have reached a breaking point. Whether leaving the workforce or paying for additional help to deal with the overload, the economic effects of these changes will feed a recessionary mindset in many consumers.


I have avoided the elephant in the room which is the negative effect of inadequate comprehensive economic stimulus. The enhanced unemployment benefits and stimulus checks buoyed spending through much of Q2. JP Morgan Chase reported, “Spending of the unemployed increased by 22 percent upon receipt of unemployment benefits and declined by 14 percent in August with the expiration of the $600 supplement. The unemployed roughly doubled their liquid savings over the four-month period between March and July 2020 but then spent two-thirds of the accumulated savings in August alone.” The liquidity deficit becomes more acute with every passing month as we arrive at Holiday 2020.


Retailers are responding and adapting to the dynamic nature of 2020. Amazon Prime Day inaugurated the Holiday 2020 in the second week of October. As of publication, Amazon has not yet released the total 2020 Prime Day sales figures, but the company reported a 60 percent increase in growth over 2019. While Amazon’s outlook may appear rosy, the meta-retailer will not be immune from contagion should consumers develop a recessionary mindset, or the economy veer into another recession.

Meeting the needs of the pre-vaccine consumer is a conundrum for all retailers. They are approaching the season with an eye to safety, fulfillment, and caution. Bloomberg reported that Neiman Marcus is offering private in-store bookings. Lululemon is setting up hubs in malls where they already have a footprint to reduce crowding. Levi Strauss & Company CEO Chip Bergh’s approach is inventory management, “He’s willing to forgo a sale rather than get stuck holding excess merchandise. If he tries to sell too much product, he could end up needing extensive markdowns just to get rid of it. No retailer wants that.” Neiman’s CEO Geoffroy van Raemdonck is quoted, “We don’t know what’s going to happen, but we want to have options.”

Report Card Results

Options and tactical preparedness are indeed the optimal approaches given current circumstances. The economy appears to be on a knife’s edge. The predictions range widely from Goldman’s rosy outlook to The Federal Reserve’s firm warnings, and plans need to be in ready-position for either outcome. The mixed signals result in a not yet grade for the retail economy.   Perhaps the best philosophical result is to hope that we are standing at the gates of heaven but prepare for the gates of hell.



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